nation can scarcely be inferred from a measurement of national income as defined [by the GDP]” (Kuznets, 1934, report to Congress).

More recently, there has been a renewal of interest in the development of satellite household production accounts. A number of individual scholars have made serious efforts to lay out a framework for such accounts (see, e.g., Ironmonger, 1996; Landefeld and McCulla, 2000). Several national statistical agencies are in the early stages of developing satellite household production accounts. Among other efforts, Eurostat is funding several country-specific projects, and the Office for National Statistics in the United Kingdom has developed an account that estimates a value for that country’s household production (see Holloway et al., 2002). A major catalyst for this activity—and for prospects of future progress—is the development of time-use surveys in a number of countries.

In this chapter we analyze the nature of household production and discuss the issues involved in measuring its contributions to an expanded notion of gross domestic product (GDP) and to the construction of satellite national accounts. In keeping with the purpose of developing a framework for satellite accounts, we consider how to measure the quantities of the various inputs used by households to generate their products and how to assign values to those inputs. We then turn to issues of classifying and valuing the outputs from home production, which we argue should be done independently from the measurement and valuation of input quantities so as to maintain the double-entry bookkeeping that is the foundation of all accounting.

Accounting for the value of what is produced in households always has been conceptually necessary for obtaining a complete picture of what society produces. Indeed, in a prehistoric or undeveloped society, most of what was produced would have been outside the market; the only sensible “national” accounts would consist almost entirely of household production. With the growth of markets and of trading states and the subsequent development of expanded trade in manufactured goods and then in services, the relative importance of home production in total final output clearly diminished. Researchers, typically working with data from European countries, Australia, or Canada, have produced varying estimates of the magnitude of output from the household sector. Niemi and Hamunen (1999) estimate that the value of household output ranges from about 35 to 55 percent of GDP.¹ All of these estimates are rough since neither the physical magnitude of the output nor its value have been precisely measured.

Basic demographic information allows another way to get a rough indication of the amount of household output relative to the market output of the nation About two-thirds of the U.S. population over age 16 is in the labor force (U.S.